April data not much to cheer about
The barrage of mixed April data on the Chinese economy has sent a less than clear message about what to expect in the coming months.
While fixed asset investment, domestic consumption and the money suply were up, exports were down, industrial production grew less than expected and defaltion continued to take hold.
That fixed asset investment stood at RMB1.3 trillion, an increase of 34 percent on last year and faster than March's year-on-year increase of 30.3 percent, may have less of an impact on the overall productivity than expected.
In 2008, fixed asset investment rose by 25.5 percent contributing to a 4 percent rise in GDP but in the first quarter of this year the higher rise of 28.8 percent acually only contributed to a 2 percent rise in GDP.
This is because of the falling prominance of the real estate industryas a driver for GDP growth. In 2008 investment in real estate grew 20.9 percent, but it has now slowed right down, increasing only 4.1 percent in the first quarter and 6.7 percent in April.
And while consumption growth rose a little month-on-month (up 0.1 percent to 14.8 percent), it was still less than that increases in the first quarter, which grew 15 percent and even less than 2008, when it grew by 21.6 percent. And with the economy counting on consumtion make up for the growth lost to exprts, there is still a long way to go.
Also April increase in cash and checking money may have increased by 17.48 percent, but it was in proportion to the broader increase in money supply (M2) which was up 25.95 percent on the year before according the central bank. That means that a larger proportion of the money has not really been taken up by the consumer.
There does not seem to be much top be too optimistic about on the basis of April data, and that it seems likely that the pattern of dwindling exports and ineffective fixed asset investment will continue for a while yet, making domestic consumption the key and only hope in reserecting the economy in the short term.
Other Shandong sooth articles
- The trouble with Chinese real estate
2009-03-11 - How to read 6.1?
2009-04-18
